An Essay on the Principle of Population
Book III, Chapter V
Of Poor Laws.
To remedy the frequent distresses of the poor, laws to enforce their relief have been instituted; and in the establishment of a general system of this kind England has particularly distinguished herself. But it is to be feared, that, though it may have alleviated a little the intensity of individual misfortune, it has spread the evil over a much larger surface.
It is a subject often started in conversation, and mentioned always as a matter of great surprise, that, notwithstanding the immense sum which is annually collected for the poor in this country, there is still so much distress among them. Some think that the money must be embezzled for private use; others, that the churchwardens and overseers consume the greatest part of it in feasting. All agree that somehow or other it must be very ill managed. In short, the fact, that even before the late scarcities three millions were collected annually for the poor, and yet that their distresses were not removed, is the subject of continual astonishment. But a man who looks a little below the surface of things would be much more astonished, if the fact were otherwise than it is observed to be; or even if a collection universally of eighteen shillings in the pound, instead of four, were materially to alter it.
Suppose, that by a subscription of the rich the eighteen pence or two shillings, which men earn now, were made up five shillings: it might be imagined, perhaps, that they would then be able to live comfortably, and have a piece of meat every day for their dinner. But this would be a very false conclusion. The transfer of three additional shillings a day to each labourer would not increase the quantity of meat in the country. There is not at present enough for all to have a moderate share. What would then be the consequence? the competition among the buyers in the market of meat would rapidly raise the price from eight pence or nine pence to two or three shillings in the pound, and the commodity would not be divided among many more than it is at present. When an article is scarce, and cannot be distributed to all, he that can shew the most valid patent, that is, he that offers the most money, becomes the possessor. If we can suppose the competition among the buyers of meat to continue long enough for a greater number of cattle to be reared annually, this could only be done at the expense of the corn, which would be a very disadvantageous exchange; for it is well known, that the country could not then support the same population; and when subsistence is scarce in proportion to the number of people, it is of little consequence, whether the lowest members of the society possess two shillings or five. They must, at all events, be reduced to live upon the hardest fare, and in the smallest quantity.
It might be said, perhaps, that the increased number of purchasers in every article would give a spur to productive industry, and that the whole produce of the island would be increased. But the spur that these fancied riches would give to population would more than counterbalance it; and the increased produce would be to be divided among a more than proportionably increased number of people.
A collection from the rich of eighteen shillings in the pound, even if distributed in the most judicious manner, would have an effect similar to that resulting from the supposition which I have just made; and no possible sacrifices of the rich, particularly in money, could for any time prevent the recurrence of distress among the lower members of society, whoever they were. Great changes might indeed be made. The rich might become poor, and some of the poor rich: but while the present proportion between population and food continues, a part of the society must necessarily find it difficult to support a family, and this difficulty will naturally fall on the least fortunate members.
It may at first appear strange, but I believe it is true, that I cannot by means of money raise the condition of a poor man, and enable him to live much better than he did before, without proportionably depressing others in the same class. If I retrench the quantity of food consumed in my house, and give him what I have cut off, I then benefit him without depressing any but myself and family, who perhaps may be well able to bear it. If I turn up a piece of uncultivated land, and give him the produce, I then benefit both him and all the members of society, because what he before consumed is thrown into the common stock, and probably some of the new produce with it. But if I only give him money, supposing the produce of the country to remain the same, I give him a title to a larger share of that produce than formerly, which share he cannot receive without diminishing the shares of others. It is evident that this effect in individual instances must be so small as to be totally imperceptible; but still it must exist, as many other effects do which, like some of the insects that people the air, elude our grosser perceptions.
Supposing the quantity of food in any country to remain the same for many years together, it is evident that this food must be divided according to the value of each man's patent, or the sum of money which he can afford to spend in this commodity so universally in request. It is a demonstrative truth, therefore, that the patents of one set of men could not be increased in value without diminishing the value of the patents of some other set of men. If the rich were to subscribe and give five shillings a day to five hundred thousand men, without retrenching their own tables, no doubt can exist, that as these men would live more at their ease, and consume a greater quantity of provisions, there would be less food remaining to divide among the rest; and consequently each man's patent would be diminished in value, or the same member of pieces of silver would purchase a smaller quantity of subsistence, and the price of provisions would universally rise.
These general reasonings have been strikingly confirmed during the late scarcities.*19 The supposition which I have made of a collection from the rich of eighteen shillings in the pound has been newly realized; and the effect has been such as might have been expected. If the same distribution had been made when no scarcity existed, a considerable advance in the price of provisions would have been a necessary consequence; but following as it did a scarcity, its effect must have been doubly powerful. No person, I believe, will venture to doubt, that if we were to give three additional shillings a day to every labouring man in the kingdom, as I before supposed, in order that he might have meat for his dinner, the price of meat would rise in the most rapid and unexampled manner. But surely, in a deficiency of corn, which renders it impossible for every man to have his usual share, if we still continue to furnish each person with the means of purchasing the same quantity as before, the effect must be in every respect similar.
It seems in great measure to have escaped observation, that the price of corn in a scarcity will depend much more upon the obstinacy with which the same degree of consumption is persevered in, than on the degree of the actual deficiency. A deficiency of one half of a crop, if the people could immediately consent to consume only one half of what they did before, would produce little or no effect on the price of corn. A deficiency of one-twelfth, if exactly the same consumption were to continue for ten or eleven months, might raise the price of corn to almost any height. The more is given in parish assistance, the more power is furnished of persevering in the same consumption; and, of course, the higher will the price rise before the necessary diminution of consumption is effected.
It has been asserted by some people, that high prices do not diminish consumption. If this were really true, we should see the price of a bushel of corn at a hundred pounds or more, in every deficiency, which could not be fully and completely remedied by importation. But the fact is, that high prices do ultimately diminish consumption; but, on account of the riches of the country, the unwillingness of the people to resort to substitutes, and the immense sums which are distributed by parishes, this object cannot be attained till the prices become excessive, and force even the middle classes of society, or, at least, those immediately above the poor, to save in the article of bread from the actual inability of purchasing it in the usual quantity. The poor who were assisted by their parishes, had no reason whatever to complain of the high price of grain; because it was the excessiveness of this price, and this alone, which by enforcing such a saving left a greater quantity of corn for the consumption of the lowest classes, which corn the parish allowances enabled them to command. The greatest sufferers in the scarcity were, undoubtedly, the classes immediately above the poor; and these were in the most marked manner depressed by the excessive bounties given to those below them. Almost all poverty is relative; and I much doubt whether these people would have been rendered so poor, if a sum equal to half of these bounties had been taken directly out of their pockets, as they were, by the new distribution of the money of the society which actually took place.*20 This distribution, by giving to the poorer classes a command of food so much greater than that to which their degree of skill and industry entitle them, in the actual circumstances of the country, diminished exactly in the came proportion that command over the necessaries of life, which the classes above them, by their superior skill and industry, would naturally possess; and it may be a question, whether the degree of assistance which the poor received, and which prevented them from resorting to the use of those substitutes which, in every other country on such occasions the great law of necessity teaches, was not more than overbalanced by the severity of the pressure on so large a body of the people from the extreme high prices, and the permanent evil which must result from forcing sees many persons on the parish, who before thought themselves almost out of the reach of want.
If we were to double the fortunes of all those who possess above a hundred a year, the effect on the price of grain would be slow and inconsiderable; but if we were to double the price of labour throughout the kingdom, the effect in raising the price of grain would be rapid and great. The general principles on this subject will not admit of dispute; and that, in the particular case which we have been considering, the bounties to the poor were of a magnitude to operate very powerfully in this manner will sufficiently appear, if we recollect that before the late scarcities the sum collected for the poor was estimated at three millions, and that during the year 1801 it was said to be ten millions. An additional seven millions acting at the bottom of the scale,*21 and employed exclusively in the purchase of provisions, joined to a considerable advance in the price of wages in many parts of the kingdom, and increased by a prodigious sum expended in voluntary charity, must have had a most powerful effect in raising the price of the necessaries of life, if any reliance can be placed on the clearest general principles confirmed as much as possible by appearances. A man with a family has received, to my knowledge, fourteen shillings a week from the parish. His common earnings were ten shillings a week, and his weekly revenue, therefore, twenty-four. Before the scarcity he had been in the habit of purchasing a bushel of flour a week with eight shillings perhaps, and, consequently, had two shillings out of his ten, to spare for other necessaries. During the scarcity he was enabled to purchase the same quantity at nearly three times the price. He paid twenty-two shillings for his bushel of flour, and had, as before, two shillings remaining for other wants. Such instances could not possibly have been universal, without raising the price of wheat very much higher than it really was during any part of the dearth. But similar instances were by no means unfrequent; and the system itself of measuring the relief given by the price of grain was general.
If the circulation of the country had consisted entirely of specie, which could not have been immediately increased, it would have been impossible to have given such an additional sum as seven millions to the poor without embarrassing, to a great degree, the operations of commerce. On the commencement, therefore, of this extensive relief, which would necessarily occasion a proportionate expenditure in provisions throughout all the ranks of society, a great demand would be felt for an increased circulating medium. The nature of the medium then principally in use was such, that it could be created immediately on demand. From the accounts of the Bank of England, as laid before Parliament, it appeared, that no very great additional issues of paper took place from this quarter. The three millions and a half added to its former average issues were not probably much above what was sufficient to supply the quantity of specie that had been withdrawn from the circulation., If this supposition be true, (and the small quantity of gold which made its appearance at that time furnishes the strongest reason for believing that nearly as much as this must have been withdrawn,) it would follow that the part of the circulation originating in the Bank of England, though changed in its nature, had not been much increased in its quantity; and with regard to the effect of the circulating medium on the prices of all commodities, it cannot be doubted that it would be precisely the same, whether this medium were made up principally of guineas, or of pound-notes and shillings which would pass current for guineas.
The demand, therefore, for an increased circulating medium was left to be supplied principally by the country banks, and it could not be expected that they should hesitate in taking advantage of so profitable an opportunity. The paper issues of a country bank are, as I conceive, measured by the quantity of its notes which will remain in circulation; and this quantity is again measured, supposing a confidence to be established, by the sum of what is wanted to carry on all the money transactions of the neighbourhood. From the high price of provisions, all these transactions became more expensive. In the single article of the weekly payment of labourers' wages, including the parish allowances, it is evident that a very great addition to the circulating medium of the neighbourhood would be wanted. Had the country banks attempted to issue the same quantity of paper without such a particular demand for it, they would quickly have been admonished of their error by its rapid and pressing return upon them; but at this time it was wanted for immediate and daily use, and was, therefore, eagerly absorbed into the circulation. It may even admit of a question, whether, under similar circumstances, the country banks would not have issued nearly the same quantity of paper, if the Bank of England had not been restricted from payment in specie. Before this event the issues of the country banks in paper were regulated by the quantity which the circulation would take up; and after, as well as before, they were obliged to pay the notes which returned upon them in Bank of England circulation. The difference in the two cases would arise principally from the pernicious custom, adopted since the restriction of the bank, of issuing one and two pound notes, and from the little preference that many people might feel, if they could not get gold, between country bank paper and Bank of England paper.
This very great issue of country bank paper during the years 1800 and 1801 was evidently, therefore, in its origin, rather a consequence than a cause of the high price of provisions; but being once absorbed into the circulation, it must necessarily affect the price of all commodities, and throw very great obstacles in the way of returning cheapness, This is the great mischief of the system. During the scarcity, it is not to be doubted that the increased circulation, by preventing the embarrassments which commerce and speculation must otherwise have felt, enabled the country to continue all the branches of its trade with less interruption, and to import a much greater quantity of grain, than it could have done otherwise; but to overbalance these temporary advantages, a lasting evil might be entailed upon the community, and the prices of a time of scarcity might become permanent, from the difficulty of reabsorbing this increased circulation.
In this respect, however, it is much better that the great issue of paper should have come from the country banks than from the Bank of England. During the restriction of payment in specie, there is no possibility of forcing the bank to retake its notes when too abundant; but with regard to the country banks, as soon as their notes are not wanted in the circulation, they will be returned; and if the Bank of England notes be not increased, the whole circulating medium will thus be diminished.
We may consider ourselves as peculiarly fortunate, that the two years of scarcity were succeeded by two events the best calculated to restore plenty and cheapness—an abundant harvest, and a peace; which together produced a general conviction of plenty, in the minds both of buyers and sellers; and by rendering the first slow to purchase, and the others eager to sell, occasioned a glut in the market, and a consequent rapid fall of price, which has enabled parishes to take off their allowances to the poor, and thus to present a return of high prices, when the alarm among the sellers was over.
If the two years of scarcity had been succeeded merely by years of average crops, I am strongly disposed to believe, that, as no glut would have taken place in the market, the price of grain would have fallen only in a comparatively inconsiderable degree, the parish allowances could not leave been resumed, the increased quantity of paper would still have been wanted, and the price of all commodities might by degrees have been regulated permanently according to the increased circulating medium.
If instead of giving the temporary assistance of parish allowances, which might be withdrawn on the first fall of price, we had raised universally the wages of labour, it is evident, that the obstacles to a diminution of the circulation and to returning cheapness would have been still farther increased; and the high price of labour would have become permanent, without any advantage whatever to the labourer.
There is no one that more ardently desires to see a real advance in the price of labour than myself; but the attempt to effect this object by forcibly raising the nominal price, which was practised to a certain degree, and recommended almost universally during the late scarcities, every thinking man must reprobate as puerile and ineffectual.
The price of labour, when left to find its natural level, is a most important political barometer, expressing the relation between the supply of provisions, and the demand for them; between the quantity to be consumed and the number of consumers; and taken on the average, independently of accidental circumstances, it further expresses clearly the wants of the society respecting population; that is, whatever may be the number of children to a marriage necessary to maintain exactly the present population, the price of labour will be just sufficient to support this number, or be above it, or below it, according to the state of the real funds for the maintenance of labour, whether stationary, progressive or retrograde. Instead, however, of considering it in this light, we consider it as something which we may raise or depress at pleasure, something which depends principally upon his Majesty's justices of the peace. When an advance in the price of provisions already expresses that the demand is too great for the supply, in order to put the labourer in the same condition as before, we raise the price of labour, that is, we increase the demand, and are then much surprised that the price of provisions continues rising. In this we act much in the same manner as if, when the quicksilver in the common weather-glass stood at stormy, we were to raise it by some mechanical pressure to settled fair, and then be greatly astonished that it continued raining.
Dr. Smith has clearly shewn, that the natural tendency of a year of scarcity is either to throw a number of labourers out of employment, or to oblige them to work for less than they did before, from the inability of masters to employ the same number at the same price. The raising of the price of wages tends necessarily to throw more out of employment, and completely to prevent the good effects, which, he says, sometimes arise from a year of moderate scarcity, that of making the lower classes of people do more work, and become more careful and industrious. The number of servants out of place, and of manufacturers wanting employment during the late scarcities, were melancholy proofs of the truth of these reasonings. If a general rise in the wages of labour had taken place proportioned to the price of provisions, none but farmers and a few gentlemen could have afforded to employ the same number of workmen as before. Additional crowds of servants and manufacturers would have been turned off; and those who were thus thrown out of employment would of course have no other refuge than the parish. In the natural order of things a scarcity must tend to lower, instead of to raise, the price of labour.
After the publication and general circulation of such a work as Adam Smith's, I confess it appears to me strange, that so many men, who would yet aspire to be thought political economists, should still think that it is in the power of the justices of the peace or even of the omnipotence of parliament to alter by a fiat the whole circumstances of the country; and when the demand for provisions is greater than the supply, by publishing a particular edict, to make the supply at once equal to or greater than the demand. Many men who would shrink at the proposal of a maximum, would propose themselves, that the price of labour should be proportioned to the price of provisions, and do not seem to be aware that the two proposals are very nearly of the same nature, and that both tend directly to famine. It matters not whether we enable the labourer to purchase the same quantity of provisions which he did before, by fixing their price, or by raising in proportion the price of labour. The only advantage on the side of raising the price of labour is, that the rise in the price of provisions, which necessarily follows it, encourages importation: but putting importation out of the question, which might possibly be prevented by war, or other circumstances, a universal rise of wages in proportion to the price of provisions, aided by adequate parish allowances to those who were thrown out of work, would, by preventing any kind of saving, in the same manner as a maximum, cause the whole crop to be consumed in nine months, which ought to have lasted twelve, and thus produce a famine. At the same time we must not forget, that both humanity and true policy imperiously require, that we should give every assistance to the poor on these occasions, that the nature of the case will admit. If provisions were to continue at the price of scarcity, the wages of labour must necessarily rise, or sickness and famine would quickly diminish the number of labourers; and the supply of labour being unequal to the demand, its price would soon rise in a still greater proportion than the price of provisions. But even one or two years of scarcity, if the poor were left entirely to shift for themselves, might produce some effect of this kind, and consequently it is our interest, as well as our duty, to give them temporary aid in such seasons of distress. It is on such occasions that every cheap substitute for bread, and every mode of economizing food should be resorted to. Nor should we be too ready to complain of that high price of corn, which by encouraging importation increases the supply.
As the inefficacy of poor-laws, and of attempts forcibly to raise the price of labour, is most conspicuous in a scarcity, I have thought myself justified in considering them under this view; and as these causes of increased price received great additional force during the late scarcity from the increase of the circulating medium, I trust, that the few observations which I have made on this subject will be considered as an allowable digression.
Notes for this chapter
The scarcities referred to in this chapter were those of 1800 and 1801.
Supposing the lower classes to earn on an average ten shillings a week, and the classes just above them twenty, it is not to be doubted, that in a scarcity these latter would be more straightened in their power of commanding the necessaries of life, by a donation of ten shillings a week to those below them, than by the subtraction of five shillings a week from their own earnings. In the one case, they would be all reduced to a level; the price of provisions would rise in an extraordinary manner from the greatness of the competition; and all would be straightened for subsistence. In the other case, the losses above the poor would still maintain a considerable part of their relative superiority; the price of provisions would by no means rise in the same degree; and their remaining fifteen shillings would purchase much more than their twenty shillings in the former case.
See a small pamphlet published in November, 1800, entitled, An Investigation of the Cause of the present high Price of Provisions. This pamphlet was mistaken by some for an inquiry into the cause of the scarcity, and as each it would naturally appear to be incomplete, adverting, as it does, principally to a single cause. But the sole object of the pamphlet was to give the principal reason for the extreme high price of provisions, in proportion to the degree of the scarcity, admitting the deficiency of one-fourth, as stated in the Duke of Portland's letter; which, I am much inclined to think, was very near the truth. .
End of Notes
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